Cluttons releases Bahrain market update Q2 2011

Press release
Published August 8th, 2011 - 11:50 GMT

Cluttons, the real estate specialist that has enjoyed a dedicated Middle Eastern presence since 1976 and with the largest footprint in the region, released their second Quarterly Market Update for 2011 (the Report). 

The Report for this quarter indicates that factors such as the socio-political situation in the country, large supply of Grade A and B commercial stock in the market along with a weak demand side result in the performance of this quarter to be similar to the last. In addition, cautious tenants and landlords as well as the forthcoming summer months are also likely to negatively impact rental values in this market. 

Commenting on the market trend for office spaces, Stefan Burch, Head of Strategic Consultancy for Cluttons said, “As the real estate market in Bahrain is now a tenant’s market, to let out current stock successfully landlords must look carefully into occupier demands. The market is clearly becoming dominated by two types of tenants - small occupiers who are looking for around 100 square metres of fitted out space and occupiers who are looking for 200 to 300 square metres. With the latter requirement, due to their bargaining position, tenants will be able to negotiate rent free periods or contributions to fit out costs.” 

“Differentiating factors such as flexible floor plates, good parking provisions and ease of access and egress remain paramount to all new commercial developments. For quick occupancies, large floor plates will need to be carefully sub divided and fitted out to a good specification rather than waiting for larger companies to occupy entire floor plates,” added Burch. 

Like other real estate properties the retail market too has suffered greatly because of the unrest in the country, reduction in tourist spending coupled with reluctance on the part of retailers to progress with expansion plans. As supply continues to come online, the main challenges facing landlords remain attracting and retaining tenants. To this end landlords have been forced to offer increased incentives to existing and potential tenants. 

As a result of the continued over supply in the market coupled with poor trading conditions, landlords have been forced to offer incentives to both existing tenants and potential tenants in order to let their properties. This reflects the growing awareness of landlords regarding the benefits of a fully let property with a lower rental income than a development with low occupancy. However, given the weakness in occupier markets where tenants are not in a position to take new space even with incentives, the market risks becoming stagnant. 

Burch adds his optimistic note and reassures, “The recent stability that has been witnessed in Bahrain will be good for the retail market as the number of visitors crossing the causeway from Saudi Arabia increases.” He also added, “However, with effective retail rents continuing to come under downward pressure as a result of the large increase in stock that has come to the market over the past two years, retailers are delaying any potential expansion plans until it is clear that the recent stability will continue.” 

In Bahrain Cluttons has a diverse client base that includes many high profile clients including government organizations throughout the Arabian Gulf, major private property landlords, local and international banks, and many international corporate clients operating in the region.

Background Information

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